BOSSES at the helm of bailed-out banks could be sacked and banned from taking new jobs if the Central Bank believes they "contributed" to the predicament of their institutions, it emerged yesterday.

The clampdown on bank bosses emerged yesterday as the Central Bank revealed new 'Fitness and Probity' rules designed to raise the standard of management in Irish banks.

The system will see the Central Bank actively vet the skills, suitability and track records of senior executives and directors joining banks and insurance companies.

While the new rules will only apply to management appointed after September 1, Financial Regulator Matthew Elderfield yesterday revealed that existing bank directors will come under fresh scrutiny.

The Central Bank has drawn up plans for a review of the "fitness and probity" of all executive and non-executive directors in banks that have received state funds.

"We will pay particular regard to the actions of individuals who may have contributed to a financial institution being forced to seek government assistance," he stressed.

The review will include everything from the "professional qualifications" and "track record" of individuals to their ability to act "honestly, ethically and with integrity".

Standards

Directors who fall short of the required standards face being "removed" from their boards and may even be served with notices "to prohibit the individuals from continuing as directors".

"I don't underestimate the legal challenges that we might have," Mr Elderfield said. "But we must be prepared to make difficult judgments on fitness and probity and it's right that we should start with this group."

"We will be writing to all bank directors to advise them that this process will apply to anyone who plans to be in office as of January 1, 2012, to allow them an opportunity to make their plans accordingly."

The upcoming review will extend to some senior bank executives who don't sit on their boards, but are still considered to have significant roles.

Those who have already left their banks won't be covered by the review but their roles in their former banks' bailout will come under scrutiny should they try to "re-enter the industry", Mr Elderfield said.

This means that former bankers from AIB, Bank of Ireland, Anglo Irish Bank, EBS, Irish Life & Permanent and Irish Nationwide would all face increased scrutiny if they want to re-enter the banking sector.

The effort to clean-up bank boardrooms and inspire higher standards amongst managers comes after various reports found that poor leadership and management contributed to the banking collapse.

New regime

Under the new regime, the most senior roles at banks and insurers will be subject to pre-approval from the Central Bank, while the regulator can also run the rule over other senior executives to see if they measure up to the standard.

"When an issue arises we will also have the power to carry out a full investigation," Mr Elderfield said yesterday.

"We will be able, where appropriate, to suspend or remove an individual from a senior position in a regulated firm."

Banks and insurance companies have been given until May 20 to submit their feedback on the rules proposed yesterday. The Institute of Directors yesterday said it "welcomed the opportunity to engage on the proposals".

"Ensuring that the most competent and qualified people are appointed to our boards is vital to improving standards of corporate governance in Ireland," said the institute's chief executive Maura Quinn.